China has hidden an amount of money capable of influencing the global economy. This is the result of the survey conducted by Bard W. Setser. What do we know about the $3 trillion?
China has hidden monetary reserves of around $3 trillion. They are called "shadow reserves" and are larger than Norway’s and more diverse than Singapore’s. This is the study published in The China Project and coordinated by Bard W. Setser.
In this W. Setser, an analyst at the US Treasury Department in the recent past, tried to rebuild the financial system of China and its real monetary reserves. The study states that from 2002 to 2012 the Chinese Central Bank was active in the foreign exchange market and bought dollars to prevent the Chinese currency from remaining competitive in terms of trade balance, favoring exports.
In the last period, however, Chinese reserves have stopped growing, at least those in the light of the sun and hence the suspicion of shadow reserves. Shadow monetary reserves are where China gets the money for its global influence plans.
China is sitting on a pile of cash: what The China Project study reveals
According to various foreign sources and based on a report by The China Project, China would be sitting on a pile of money for a value of 6,000 billion dollars. But half would be hidden. It is precisely the hidden $3 trillion that represents a new type of risk for the global economy.
What kind of risk are we talking about? “China’s lack of transparency is a problem for the world - writes Setser and this is because - China is structurally so central to the global economy that anything it does, whether seen or not, will eventually have a huge impact on the rest of the world". An example of the influence that Chinese reserves can have is their role in financing the Belt and Road Initiative and much more, such as making entire nations go bankrupt.
Chinese strategy: what’s behind money
The size of the "shadow reserves" highlights a crucial fact that risks going unnoticed, namely that "globally, China is still a huge creditor and the weight of China’s massive accumulation of foreign currency is still felt in Worldwide". So China can use the reserves for its strategic plans.
Like when reserves flowed into state-owned commercial banks, i.e. Bank of China, China Construction Bank (recapitalized with $45 billion), Industrial & Commercial Bank of China ICBC (received $15 billion in 2005) and the Agricultural Bank of China. From 2005 to 2008, China’s hidden deals brought the Chinese government $400 billion in hidden reserves, or 10% of GDP.
Such investments from monetary reserves involve not only Chinese banks, but also companies - such as the Russian state oil company that has obtained a 15 billion dollar loan to expand production in the Far East and 10 billion dollars for an oil pipeline - or states such as Venezuela and Angola through credit lines.
Original article published on Money.it Italy 2023-07-06 19:19:38. Original title: Così la Cina ha nascosto 3.000 miliardi di dollari al mondo
